Abstract

http://ssrn.com/abstract=1943297
 
 

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Behavioral Efficiency II: A Simple Laboratory Demonstration


Ron Harstad


University of Missouri

October 9, 2011

ISER Discussion Paper No. 819

Abstract:     
Laboratory experiments reporting on shortfalls from allocative efficiency of allocation mechanisms depend on the induced-values methodology, which cannot be extended to the field. Harstad [2011] proposes to observe efficiency of allocation mechanisms without knowing motivations via behavior in appropriately designed aftermarkets. This paper demonstrates the approach in a highly simplified economy: allocation of a single unit of an abstract commodity. In the context studied, second-price auctions are observed to yield significantly greater behavioral inefficiencies than first-price auctions, both in terms of frequency of behaviorally inefficient outcomes, and in terms of the expected size of gains from aftermarket trade missed by the auction itself. The design is shown to be field-ready.

Number of Pages in PDF File: 12

Keywords: behavioral efficiency, field experiment methodology, allocative efficiency, efficiency of auctions, aftermarkets

JEL Classification: C9, C93, D01, D61, D03, D46

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Date posted: October 13, 2011  

Suggested Citation

Harstad, Ron, Behavioral Efficiency II: A Simple Laboratory Demonstration (October 9, 2011). ISER Discussion Paper No. 819. Available at SSRN: http://ssrn.com/abstract=1943297 or http://dx.doi.org/10.2139/ssrn.1943297

Contact Information

Ronald M Harstad (Contact Author)
University of Missouri ( email )
United States
HOME PAGE: http://harstad.missouri.edu
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